Paris is beginning to acknowledge the possibility that India might not buy the Rafale fighter because of sharp differences over the price, and New Delhi’s insistence on enforceable guarantees regarding the fighter’s delivery, performance and availability.
A senior French official with a close view of the on-going negotiations between New Delhi and Paris for 36 Rafale fighters told Business Standard on condition of anonymity: “If some people in the MoD (the ministry of defence) do not want to allow the Rafale deal to go through, so be it. We are currently building it for Egypt and Qatar, and we could have another customer in Malaysia.”
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Underlining the irritation at repeated US offers to set up an assembly line in India to build the American F-16 Super Viper, the French official taunted: “If you don’t want the Rafale, go ahead and build the F-16 here. You can build it in India and supply it to Pakistan also.”
He was referring to Washington’s announcement last month of the sale to Pakistan of eight advanced Block 50/52 F-16 fighters for $699 million. Simultaneously, a senior Lockheed Martin official had publicly offered to “move our [F-16] production line from the US to India”.
Reminded that France, too, was supplying submarines to both India and Pakistan (DCNS is building six Scorpene submarines with Mazagon Dock, after earlier selling Pakistan three advanced Agosta-90B submarines with air independent propulsion), he retorted, “That is different. Pakistan is getting a different submarine from what we are providing to India.”
The official dismissed the notion that an Indian order was critical for Dassault to break-even in the Rafale project, in which tens of billion euros have been spent on developing the fighter and establishing a production line. The official claimed, “The Rafale project is commercially viable based on the numbers that the French military requires, even if there is not a single export order.”
In fact, defence budget cuts have forced the French military to slash Rafale orders from over 300 originally planned to only 180 ordered so far. That is a small order, given that the Eurofighter Typhoon has over 700 aircraft on order; while more than 4,500 F-16s have been built over the years.
On New Delhi’s demands for sovereign guarantees from the French government, or a bank guarantee from Dassault, to cover the possibility of delivery or performance shortfalls in the Rafale, the official declared the two countries would soon sign an inter-governmental agreement (IGA), which would function as a sovereign guarantee.
“The government of France is standing behind the sale. Surely, India is not asking for a bank guarantee when it has the word of the French government?” asked the official.
When it was pointed out that the IGA would only outline a supply agreement in broad terms, without detailed binding clauses and penalties, the official responded that the IGA was a strategic agreement between Paris and New Delhi, and that “a phrase here or a sentence there would make no difference.”
“In 1917, when the United States abandoned its isolationism and sent a division of troops to France to fight in World War I, it was not because there was some document with a clause that required them to fight. It was because of a common strategic aim. New Delhi and Paris must have a common strategic aim on the Rafale.”
French officials argue that if Dassault is required to provide a bank guarantee against possible shortfalls in delivery and performance, India should cover that cost, which is normally three-four per cent of the guarantee amount.
Meanwhile, the Cost Negotiation Committee on the Rafale has made little headway in bridging the gap between the French demand and Indian counter-offer, which are believed to be around euro 12 billion and euro 9 billion, respectively. Issues of liability are further complicating the likelihood of a deal soon.
Prime Minister Narendra Modi, while visiting Paris last April, had requested for 36 Rafales, after a breakdown in negotiations for a much larger order for 126 Rafales. The Indian Air Force had chosen the Rafale on January 31, 2012, after an exhaustive evaluation of six fighter aircraft.